How a Blended Workforce Model Helps Cut Hospital Labor Costs

By Sarah Knight, ShiftMed Content Manager//Workforce Strategy, Workforce Technology, Healthcare Staffing
A hospital nurse's desk with a stethoscope and a health system labor cost report.

Labor accounts for over half of hospital spending, representing 56% of the $890 billion in 2024. With numbers like that, cutting labor costs is essential. The good news? Innovative staffing strategies are changing the game—think AI-powered workforce technology, phased shift distribution, and a blended approach that maximizes flexibility and minimizes costs.

RN salaries have jumped 26.6% faster than inflation over the past four years, according to AHA analysis of Lightcast data. While these pay increases help keep nurses at the bedside, they add to hospitals’ growing financial strain.

2024 Health System Labor Cost Analysis

Our latest analysis of top U.S. health systems shows an average labor cost of 48%. ShiftMed partners are coming in 6% lower, unlocking millions in savings to reinvest in their operations. Submit your info to access the full report and uncover the workforce model outperforming the industry average.

Benefits of a Blended Workforce Model

Relying too much on traditional staffing is driving up your labor costs. It’s time to switch to a blended workforce model that combines core nurses, PRNs, float pools, and external support to align staffing with real-time patient demand. Benefits include:

  • Greater staffing flexibility and adaptability.

  • Broader access to specialized skills.

  • Enhanced cost control and efficiency.

  • Easier to scale up or down as needed.

  • Faster, more efficient hiring.

Blending your workforce offers big benefits but managing multiple staffing types and keeping everyone engaged can be a challenge. That’s where workforce technology and phased shift distribution come in.

AI-Powered Technology for Shift Optimization

AI-powered shift matching—like ShiftMed’s Intelligent Routing™—combined with phased shift distribution, takes the guesswork out of leveraging a blended workforce model. It automatically assigns the right clinicians to the right shifts, prioritizing your core team first and only pulling in external support when needed. By analyzing overtime, shift commitments, and availability, the technology finds the most qualified, lowest-cost nurse for each opening, empowering your hospital to maximize resources, improve coverage, and cut labor costs.

An infographic that shows how ShiftMed's AI-powered Intelligent Routing technology distributes shifts to a blended workforce model.

Phased Shift Distribution in Healthcare

Phased shift distribution helps hospitals cut labor costs by strategically opening shifts in stages, based on priority and cost-efficiency. Here’s how it works and why it matters:

Reduces High-Cost Labor

Your internal nursing staff get first pick of shifts, followed by local per diem support—reserving costly travelers and agencies only when needed.

Limits Unnecessary Overtime

Your hospital avoids premium pay by filling open shifts with available staff before hitting overtime thresholds.

Improves Internal Fill Rates

Your internal staff are more likely to pick up shifts when offered early and in a structured way, helping reduce reliance on external labor.

Maximizes PRN and Float Pool Utilization

Strategic shift distribution helps your hospital deploy PRN and float staff efficiently, filling gaps without driving up costs.

An infographic showing how phased shift distribution works in a blended workforce model.

The Bottom Line

As RN wages outpace inflation and labor continues to consume the largest share of hospital spending, traditional staffing models just don’t cut it. Hospitals need innovative, flexible workforce strategies to stay ahead without sacrificing care quality.

That’s where a blended workforce model, supported by AI-powered technology and phased shift distribution, delivers real results. These strategies optimize operating efficiency, cut hospital labor costs, and create more responsive care teams.